Financial Performance - Net income for the third quarter of 2025 was $12.825 million, a significant increase of 18.68% compared to $10.805 million in the previous quarter[182]. - Net income for Q3 2025 was $12.8 million, up from $10.8 million in Q2 2025, driven by a $1.6 million increase in net interest income and a $1.1 million increase in non-interest income[188]. - Net income for the three months ended September 30, 2025, was $12,825 thousand, a 42.9% increase from $8,975 thousand in the same period of 2024[270]. - For the nine months ended September 30, 2025, net income was $29,940 thousand, an 18.6% increase from $25,239 thousand in the same period of 2024[278]. Earnings and Income Metrics - Diluted earnings per share rose to $0.77, up 45.3% from $0.53 year-over-year[270]. - Year-to-date Net Interest Income for the period ended September 30, 2025, was $98,021,000, compared to $82,045,000 for the same period in 2024[211]. - Net interest income for the quarter ended September 30, 2025, was $34,131,000, an increase from $32,533,000 in the previous quarter[209]. - Total non-interest income for the third quarter of 2025 was $8,716 thousand, reflecting a 7.2% increase from $8,133 thousand in the prior year[273]. Asset and Equity Growth - Total stockholders' equity increased to $417.687 million as of September 30, 2025, up from $408.506 million at June 30, 2025, representing a growth of 0.29%[182]. - Stockholders' equity increased to $417.7 million at September 30, 2025, a 4.2% rise from $400.9 million at December 31, 2024[199]. - Total assets reached $4.6 billion as of September 30, 2025, reflecting a $172.4 million increase, or 3.9%, from June 30, 2025[194]. - As of September 30, 2025, total assets increased to $4.59 billion, up by $280.8 million or 6.5% from December 31, 2024[213]. Loan and Deposit Information - Total loans were $3.4 billion as of September 30, 2025, with loan growth of $17.3 million primarily in residential real estate loans[196]. - Total deposits rose to $4.10 billion, an increase of $272.1 million or 7.1% from December 31, 2024, driven by a $125 million addition of brokered CDs[214]. - Noninterest-bearing deposits accounted for 18.8% of total deposits as of September 30, 2025, compared to 18.4% at the end of 2024[214]. - The total loans as of September 30, 2025, reached $3,424,784,000, an increase from $3,394,541,000 as of December 31, 2024[228]. Interest Income and Margins - Net interest income on a GAAP basis was $34.131 million for Q3 2025, an increase of 4.91% from $32.533 million in Q2 2025[183]. - The net interest margin improved to 3.24% for Q3 2025, compared to 3.16% in Q2 2025, indicating a positive trend in interest income generation[183]. - The Net Interest Margin improved to 3.22% for the quarter ended September 30, 2025, up from 3.15% in the previous quarter[209]. - The annualized yield on total loans improved to 5.43% for the quarter ended September 30, 2025, compared to 5.30% for the quarter ended December 31, 2024[230]. Risk Management and Credit Quality - The allowance for credit losses was $34.2 million, representing 0.99% of loans outstanding, stable compared to previous periods[204]. - Nonperforming loans decreased to $6.3 million, or 0.18% of period-end loans, down from 0.62% at December 31, 2024[205]. - The provision for credit losses for Q3 2025 was $0.8 million, up from $0.6 million in Q2 2025, influenced by charge-offs and loan balance growth[243]. - Nonperforming assets decreased to $6.7 million as of September 30, 2025, down from $21.5 million at December 31, 2024, and $22.3 million at September 30, 2024[245]. Operational Efficiency - The efficiency ratio improved to 59.56% from 65.59%, indicating better cost management[276]. - The efficiency ratio improved to 63.06% in 2025 from 67.10% in 2024, reflecting a decrease of 4.04% or 6.0%[283]. - The average balance of loans was $3,424,784 thousand with an interest rate of 5.43% for the quarter ended September 30, 2025, compared to $3,329,873 thousand at 5.27% in the same quarter of 2024[210]. Regulatory Capital and Compliance - Arrow Bank's Common Equity Tier 1 (CET1) capital ratio was 13.07% as of September 30, 2025, significantly above the minimum requirement of 4.5%[253]. - Arrow Bank qualified as "well-capitalized" under the federal banking regulatory standards as of September 30, 2025[253]. - Arrow issued $20 million of Junior Subordinated Obligations, which will continue to qualify as Tier 1 regulatory capital until maturity or redemption[241].

Financial Performance - Net income for the third quarter of 2025 was $12.8 million, or $0.77 per share, an increase from $10.8 million and $0.65 per share in the previous quarter[2] - Net income for the three months ended September 30, 2025, was $12,825,000, a 43.5% increase from $8,975,000 in the same period of 2024[18] - Basic earnings per share for the three months ended September 30, 2025, were $0.77, up from $0.54 in 2024, indicating a growth of 42.6%[18] - Net income for the quarter ended September 30, 2025, was $12,825 million, a 18.7% increase from $10,805 million in the previous quarter[21] - Basic earnings per share increased to $0.77, up from $0.65 in the prior quarter, reflecting a 18.5% growth[21] Interest Income and Margin - Record net interest income reached $34.1 million, up 4.9% from $32.5 million in the second quarter of 2025[10] - Net interest income for the quarter was $34,131 million, up from $32,533 million in the previous quarter, indicating a 4.9% increase[26] - Total interest and dividend income for the three months ended September 30, 2025, was $53,598,000, an increase of 8.7% from $49,443,000 in the same period of 2024[18] - Net interest income after provision for credit losses for the nine months ended September 30, 2025, was $91,593,000, up 15% from $79,719,000 in 2024[18] - Net Interest Margin improved to 3.22% from 2.78% in the same quarter last year, indicating enhanced profitability on earning assets[30] Asset Growth - Total assets grew by $172.4 million, or 3.9%, to $4.6 billion as of September 30, 2025[12] - Total assets as of September 30, 2025, reached $4,587,115,000, an increase from $4,306,348,000 at December 31, 2024[19] - Total assets increased to $4,399,815 thousand from $4,245,597 thousand year-over-year, showing a growth of 3.63%[30] Loans and Credit Quality - Total loans amounted to $3.4 billion, with a loan growth of $17.3 million driven by residential and commercial loans[12] - Total loans increased to $3,442,009 million in Q3 2025, up from $3,394,541 million in Q4 2024, representing a growth of 1.4%[37] - Net loans charged-off for the quarter were $830 million, compared to $518 million in the previous quarter, indicating an increase of 60.2%[37] - Nonperforming loans to period-end loans ratio improved to 0.18% in Q3 2025 from 0.62% in Q4 2024, showing a significant improvement in asset quality[37] - The allowance for credit losses was $34.2 million, representing 0.99% of loans outstanding, a slight decrease from 1.00% in the prior quarter[12] Dividends and Shareholder Returns - The company declared a quarterly cash dividend of $0.29 per share, payable on November 24, 2025[2] - Tangible book value per share increased by 2.7% to $23.85 from the prior quarter[10] - Total stockholders' equity increased to $417,687 million from $408,506 million in the previous quarter, a growth of 0.3%[25] Efficiency and Ratios - Return on average assets (ROA) increased to 1.16%, up from 1.00% in the previous quarter[7] - Return on average equity, annualized, rose to 12.32%, compared to 10.66% in the previous quarter[21] - The efficiency ratio improved to 59.56%, down from 63.41% in the previous quarter, indicating better expense control[21] - Common Equity Tier 1 Ratio improved to 13.07% from 12.73% in the previous quarter, indicating a stronger capital position[28]

Financial Performance - 3Q25 net income reached $12.8 million, resulting in an EPS of $0.77, marking an over 18% increase compared to 2Q25[13] - Year-to-date net income stands at $29.9 million, with an EPS of $1.80[13] - The FTE net interest margin (NIM) improved to 3.24% in 3Q25, compared to 3.16% in 2Q25[13] - Return on average assets (ROA) was 1.16% for 3Q25[13] - Tangible book value (TBV) per share increased by 2.7% from the previous quarter to $23.85[13] - The efficiency ratio improved to 59.6%[13] Balance Sheet and Capital Actions - Loan growth was 2% on an annualized basis[13] - Approximately $2 billion of deposits are subject to repricing with rate cuts[13] - The company repurchased $1.4 million worth of shares, totaling approximately 53,000 shares at an average cost of $26.87 per share[13] Credit Quality - Net charge-offs were 0.10% for 3Q25[13]

Core Insights - Arrow Financial Corporation's shares have rebounded over 15% since April 2025, following concerns related to tariffs and its loan portfolio [2] Company Overview - Arrow Financial Corporation is a bank holding company based in Upstate New York, with a loan portfolio that has a 17.8% exposure to commercial loans [2] Investment Strategy - The Insiders Forum focuses on small and mid-cap stocks that insiders are purchasing, aiming to outperform the Russell 2000 benchmark over time [2]

Group 1 - The article discusses the recent performance of Arrow Financial Corporation, noting a rebound of over 15% since April 2025 due to concerns regarding tariffs and the bank's loan portfolio [2] - Arrow Financial Corporation has a loan book with 17.8% exposure to commercial loans, indicating potential risk factors in its lending practices [2] - The Insiders Forum, which focuses on small and mid-cap stocks, has a model portfolio that has significantly outperformed the Russell 2000 benchmark since its launch [2] Group 2 - The Insiders Forum portfolio consists of 12-25 top stocks across various sectors that are attractively valued and have seen significant insider purchases [2] - The goal of the Insiders Forum is to consistently outperform the Russell 2000 benchmark over time [2]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited interim consolidated financial statements for Arrow Financial Corporation as of June 30, 2025, including balance sheets, income statements, and cash flows, with detailed notes explaining accounting policies and financial data [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $4.41 billion as of June 30, 2025, from $4.31 billion at year-end 2024, driven by an increase in net loans and cash equivalents, while total deposits increased to $3.93 billion and total stockholders' equity rose to $408.5 million Consolidated Balance Sheet Highlights (in Thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$4,414,719** | **$4,306,348** | | Net Loans | $3,390,563 | $3,360,943 | | Total Investment Securities | $528,395 | $570,780 | | **Total Liabilities** | **$4,006,213** | **$3,905,447** | | Total Deposits | $3,929,330 | $3,827,930 | | **Total Stockholders' Equity** | **$408,506** | **$400,901** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For the second quarter of 2025, net income was $10.8 million, a 25.6% increase year-over-year, driven by a 19.8% rise in net interest income to $32.5 million, while for the six months ended June 30, 2025, net income was $17.1 million, up 5.2% from the prior year period, with diluted EPS increasing to $1.03 from $0.97 Income Statement Summary (in Thousands, Except Per Share Data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $32,533 | $27,152 | $63,890 | $53,607 | | Provision for Credit Losses | $594 | $775 | $5,613 | $1,392 | | Non-Interest Income | $7,609 | $7,856 | $15,448 | $15,714 | | Non-Interest Expense | $25,652 | $23,318 | $51,697 | $47,330 | | **Net Income** | **$10,805** | **$8,604** | **$17,115** | **$16,264** | | **Diluted EPS** | **$0.65** | **$0.52** | **$1.03** | **$0.97** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was $20.3 million, investing activities provided $11.6 million, a significant shift from a $31.5 million use of cash in the prior year period, and financing activities provided $81.9 million, primarily from a net increase in deposits Cash Flow Summary for Six Months Ended June 30 (in Thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $20,348 | $19,428 | | Net Cash Provided (Used) By Investing Activities | $11,647 | $(31,529) | | Net Cash Provided By Financing Activities | $81,907 | $69,763 | | **Net Increase in Cash and Cash Equivalents** | **$113,902** | **$57,662** | [Notes to Interim Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Interim%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies and financial data, covering operations concentrated in upstate New York, the CECL methodology for Allowance for Credit Losses (ACL), breakdowns of investment securities and loan portfolios, debt structure, and derivative activities - The company's operations are concentrated in upstate New York, with a loan portfolio diversified but subject to the economic impact of tourism in the region[18](index=18&type=chunk) - The Allowance for Credit Losses (ACL) is estimated using the CECL model, which incorporates a six-quarter reasonable and supportable forecast of economic factors like national unemployment, GDP, and the Case-Shiller Home Price Index[27](index=27&type=chunk)[31](index=31&type=chunk) - As of June 30, 2025, gross unrealized losses in the Available-for-Sale securities portfolio were **$26.2 million**, primarily attributed to changes in interest rates rather than credit quality deterioration, and the company does not intend to sell these securities before recovery[45](index=45&type=chunk)[50](index=50&type=chunk) - Total loans reached **$3.42 billion**, and nonaccrual loans decreased significantly to **$5.3 million** at June 30, 2025, from **$20.6 million** at year-end 2024[56](index=56&type=chunk)[58](index=58&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for Q2 2025, highlighting a net income of $10.8 million, driven by increased net interest income and a lower provision for credit losses compared to Q1 2025, covering financial condition, asset quality, capital resources, liquidity, and a detailed analysis of the results of operations for the three and six-month periods ended June 30, 2025, compared to the prior year Q2 2025 Financial Highlights | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Income | $10.8 million | $6.3 million | | Net Interest Income | $32.5 million | $31.3 million | | Net Interest Margin (FTE) | 3.16% | 3.08% | | Provision for Credit Losses | $0.6 million | $5.0 million | - The significant decrease in the Q2 provision for credit losses reflects the recognition of a specific reserve in Q1 related to a Commercial Real Estate (CRE) participation loan that was subsequently charged off in Q2[178](index=178&type=chunk)[191](index=191&type=chunk) - Total assets were **$4.4 billion** at June 30, 2025, with loan growth of **$7.9 million** in Q2, driven by residential real estate loans[181](index=181&type=chunk)[183](index=183&type=chunk) - The company remains 'well-capitalized' under all regulatory definitions, with a tangible book value per share of **$23.23**, up **3.71%** from year-end 2024[185](index=185&type=chunk)[187](index=187&type=chunk) [Financial Condition](index=49&type=section&id=Financial%20Condition) As of June 30, 2025, total assets increased by 2.5% to $4.41 billion from year-end 2024, net loans grew by 0.9% to $3.42 billion, led by residential real estate, and total deposits increased by 2.6% to $3.93 billion, partly due to the addition of $125 million in brokered CDs used to reduce overall funding costs Change in Financial Condition (June 30, 2025 vs. Dec 31, 2024) | Account (in thousands) | Change $ | Change % | | :--- | :--- | :--- | | Total Assets | $108,371 | 2.5% | | Net Loans | $30,213 | 0.9% | | Total Deposits | $101,400 | 2.6% | | Stockholders' Equity | $7,605 | 1.9% | - Loan growth was driven by a **$24.9 million (1.9%)** increase in residential real estate loans, while consumer loans decreased by **$9.7 million (0.9%)**[205](index=205&type=chunk) - The increase in deposits was supported by the addition of **$125 million** in brokered CDs, which are part of a cash flow hedge strategy[202](index=202&type=chunk) - Uninsured deposits represented less than **30%** of the total deposit base as of June 30, 2025[207](index=207&type=chunk) [Asset Quality](index=54&type=section&id=Asset%20Quality) Asset quality improved significantly, with nonperforming assets decreasing to $6.8 million (0.15% of total assets) at June 30, 2025, from $21.5 million (0.50% of total assets) at year-end 2024, and the allowance for credit losses was $34.2 million, or 1.00% of total loans, with the decrease from Q1 driven by the charge-off of a previously reserved CRE participation loan Asset Quality Ratios | Ratio | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Nonperforming Assets to Total Assets | 0.15% | 0.50% | | Nonperforming Loans to Total Loans | 0.18% | 0.62% | | Allowance to Period-End Loans | 1.00% | 0.99% | - The provision for credit losses in Q2 2025 was **$0.6 million**, and the allowance for credit losses decreased from **$37.8 million** at the end of Q1 to **$34.2 million** at the end of Q2, primarily due to a **$4.2 million** net charge-off, which included the previously reserved CRE participation loan[232](index=232&type=chunk) - The remaining balance of the charged-off CRE participation loan has been reclassified to Other Assets, with the underlying properties held in an unconsolidated LLC where Arrow has an ownership interest[232](index=232&type=chunk) [Capital Resources](index=55&type=section&id=Capital%20Resources) The company remains well-capitalized, with all regulatory capital ratios exceeding minimum requirements, as the CET1 capital ratio was 12.73% as of June 30, 2025, stockholders' equity increased by $7.6 million in the first half of 2025, and the company repurchased $5.1 million of its common stock in Q2 2025 and paid a quarterly dividend of $0.28 per share Regulatory Capital Ratios (Arrow Financial Corp.) - June 30, 2025 | Ratio | Company Ratio | Regulatory Minimum (with buffer) | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 12.73% | 7.00% | | Tier 1 Risk-Based Capital | 13.37% | 8.50% | | Total Risk-Based Capital | 14.51% | 10.50% | | Tier 1 Leverage | 9.64% | 4.00% | - In Q2 2025, Arrow repurchased approximately **196,000 shares** for **$5.1 million**, and the Board authorized an additional **$5 million** for repurchases on April 30, 2025, and another **$5 million** on July 23, 2025[246](index=246&type=chunk)[247](index=247&type=chunk) - A quarterly cash dividend of **$0.28 per share** was paid in Q2 2025, representing a payout ratio of **43.08%**, and a dividend of **$0.29 per share** was declared for Q3 2025[249](index=249&type=chunk)[250](index=250&type=chunk) [Liquidity](index=57&type=section&id=Liquidity) Arrow maintains a strong liquidity position with sufficient capacity to meet obligations, with primary liquidity sources including cash, cash flow from securities and loans, and a stable core deposit base, and as of June 30, 2025, the company had $227.5 million in interest-bearing cash balances and significant unused borrowing capacity of approximately $657 million from the FHLBNY and $762 million from the FRB - Total primary liquidity was approximately **$442 million**, comprising **$227 million** of unencumbered cash and **$215 million** in unencumbered securities[256](index=256&type=chunk) - Unused borrowing capacity totaled over **$1.4 billion** from the FHLBNY, FRB, and correspondent banks[253](index=253&type=chunk)[254](index=254&type=chunk) - Uninsured deposits were less than **30%** of the total deposit base at June 30, 2025, and the company performs regular liquidity stress tests[255](index=255&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of operating results, showing that for Q2 2025 versus Q2 2024, net income rose 25.6% to $10.8 million, driven by a 19.8% increase in net interest income, and for the first six months of 2025, net income grew 5.2% to $17.1 million, with net interest income up 19.2%, while non-interest expense increased primarily due to bank unification costs and inflation-driven wage increases Comparison of Results (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $32,533 | $27,152 | 19.8% | | Non-Interest Income | $7,609 | $7,856 | (3.1)% | | Non-Interest Expense | $25,652 | $23,318 | 10.0% | | **Net Income** | **$10,805** | **$8,604** | **25.6%** | Comparison of Results (6 Months 2025 vs 6 Months 2024) | Metric (in thousands) | 6M 2025 | 6M 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $63,890 | $53,607 | 19.2% | | Non-Interest Income | $15,448 | $15,714 | (1.7)% | | Non-Interest Expense | $51,697 | $47,330 | 9.2% | | **Net Income** | **$17,115** | **$16,264** | **5.2%** | - The increase in non-interest expense for the first six months of 2025 was driven by **$1.7 million** in bank unification expenses, primarily related to project management and IT costs for the July 2025 system conversion[272](index=272&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Arrow's primary market risk is interest rate volatility, managed by the Asset/Liability Committee (ALCO), with simulation models showing the balance sheet has an inverse relationship to rate changes in the near term (liability sensitive) but becomes asset sensitive over a longer horizon, and the projected impact on net interest income from various rate shocks is within policy limits Net Interest Income Sensitivity Analysis (as of June 30, 2025) | Change in Interest Rate | Calculated change in NII - Year 1 | Calculated change in NII - Year 2 | | :--- | :--- | :--- | | -200 basis points | +1.1% | +5.6% | | -100 basis points | +0.7% | +7.0% | | +200 basis points | (2.5)% | +3.3% | - The analysis indicates that in the short term (Year 1), net interest income would decrease if rates rise and increase if rates fall, suggesting liabilities reprice faster than assets[281](index=281&type=chunk) - Over a longer term (Year 2), the balance sheet shows a more neutral to asset-sensitive profile, where rising rates would eventually increase net interest income[281](index=281&type=chunk) [Item 4. Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025[287](index=287&type=chunk) - No material changes to internal controls over financial reporting occurred during the second quarter of 2025[289](index=289&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) The company reports on two legal matters: the 'Ashe Lawsuit,' a putative class action which was settled and approved by the court in February 2025, and the 'Shareholder Derivative Complaint,' for which a settlement is pending preliminary approval, with neither settlement expected to have a material impact on the company's financial results or position - The Ashe Lawsuit, a class action alleging false and misleading statements, was settled and approved by the court on February 13, 2025, with no material financial impact[292](index=292&type=chunk) - A Shareholder Derivative Complaint, related to the same allegations as the Ashe Lawsuit, has reached a settlement pending court approval, which involves adjustments to governance structure and is not expected to have a material financial impact[293](index=293&type=chunk) [Item 1.A. Risk Factors](index=63&type=section&id=Item%201.A.%20Risk%20Factors) There have been no modifications or amendments to the risk factors previously identified in the company's 2024 Annual Report on Form 10-K - The Risk Factors identified in the 2024 Form 10-K remain the most significant risks to the company's future operations and financial condition[294](index=294&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not have any unregistered sales of equity securities, and during the second quarter of 2025, Arrow repurchased 196,497 shares of its common stock for approximately $5.2 million, with $1.5 million remaining available under the repurchase authorization as of June 30, 2025, which was subsequently increased by an additional $5 million in July 2025 Issuer Purchases of Equity Securities (Q2 2025) | Month | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April | 0 | N/A | | May | 119,671 | $26.48 | | June | 76,826 | $26.03 | | **Total** | **196,497** | **$26.31** | - On July 23, 2025, the Board increased the share repurchase authorization by **$5 million**, bringing the total available authorization to approximately **$6.5 million** as of that date[297](index=297&type=chunk) [Item 3. Defaults Upon Senior Securities](index=64&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - There were no defaults upon senior securities during the reporting period[300](index=300&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - The company has no mine safety disclosures to report[300](index=300&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) During the second quarter of 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2025[301](index=301&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and XBRL data files

Financial Performance - Net income for Q2 2025 was $10.8 million, or $0.65 per share, compared to $6.3 million and $0.38 per share in Q1 2025, representing a significant increase [2]. - Net income for Q2 2025 reached $10,805,000, representing a 26% increase compared to $8,604,000 in Q2 2024 [19]. - Net income for the quarter ended June 30, 2025, was $10,805,000, an increase of 71.5% compared to $6,310,000 for the previous quarter [22]. - Basic earnings per share for Q2 2025 were $0.65, up from $0.52 in Q2 2024, marking a 25% increase [19]. - Basic earnings per share (EPS) for the quarter was $0.65, up from $0.38 in the previous quarter, representing a 71.1% increase [22]. Interest Income and Margin - Record net interest income reached $32.5 million, up 3.8% from $31.4 million in Q1 2025 [9]. - Total interest and dividend income for Q2 2025 was $51,573,000, an increase of 7% from $47,972,000 in Q2 2024 [19]. - Net interest income after provision for credit losses for the first half of 2025 was $58,277,000, up 11% from $52,215,000 in the same period of 2024 [19]. - Net interest income for the quarter was $32,533,000, compared to $31,357,000 in the previous quarter, reflecting a growth of 3.7% [27]. - Net interest margin improved to 3.15% from 3.07% in the previous quarter, with FTE net interest margin at 3.16% [9]. - Net Interest Margin improved to 3.15% in Q2 2025 from 2.67% in Q2 2024 [31]. - The net interest spread for Q2 2025 was 2.60%, compared to 2.04% in Q2 2024 [31]. Assets and Loans - Total assets decreased by $34.2 million, or 0.8%, to $4.4 billion as of June 30, 2025 [13]. - Total assets as of June 30, 2025, were $4,414,719,000, a growth of 2.5% from $4,306,348,000 at the end of 2024 [20]. - Loans increased to $3,424,754,000 as of June 30, 2025, compared to $3,394,541,000 at the end of 2024, reflecting a growth of 0.9% [20]. - Total loans were $3.4 billion, with a loan growth of $7.9 million driven by residential real estate loans [13]. - Total loans increased to $3,424,754 million as of June 30, 2025, up from $3,394,541 million at December 31, 2024, representing a growth of 0.88% [39]. Credit Losses and Allowance - The allowance for credit losses was $34.2 million, representing 1.00% of loans outstanding, down from 1.11% in Q1 2025 [13]. - The provision for credit losses for the first half of 2025 was $5,613,000, significantly higher than $1,392,000 in the first half of 2024 [19]. - The allowance for credit losses increased to $35,238 in Q2 2025 from $31,459 in Q2 2024 [31]. - The provision for credit losses for the quarter was $594 million, down from $2,854 million in the previous quarter, reflecting a decrease in anticipated credit losses [39]. - The allowance for credit losses to period-end loans ratio was 1.00%, compared to 0.99% in the previous quarter, indicating stable coverage [39]. Equity and Dividends - Total stockholders' equity as of June 30, 2025, was $408,506,000, an increase from $400,901,000 at the end of 2024 [20]. - Total stockholders' equity increased to $408,506,000 from $404,409,000 in the previous quarter [26]. - The company declared a quarterly cash dividend of $0.29 per share, an increase of 3.6% from the prior quarter [2]. Asset Quality - Nonperforming loans decreased to $6,417 million from $21,039 million, showing a substantial improvement in asset quality [39]. - The ratio of nonperforming loans to period-end loans improved to 0.19% from 0.62% [39]. - Nonperforming assets totaled $7,007 million, down from $21,497 million, indicating a positive trend in asset management [39]. - Year-to-date net loans charged-off reached $5,020 million, up from $2,847 million in the previous year, highlighting ongoing credit challenges [39].

Financial Performance - Arrow Financial Corporation unified its former subsidiary banks into a single bank holding company, Arrow Bank, effective December 31, 2024[173]. - The company reported a tax-equivalent net interest income increase of 5% year-over-year, reflecting improved asset quality and loan growth[179]. - Arrow's efficiency ratio improved to 60%, indicating better expense control compared to the previous quarter[180]. - The tangible book value per share increased to $25.50, representing a 10% increase from the prior year[181]. - Arrow anticipates a 3% growth in net interest income for the upcoming quarter, driven by expected increases in loan demand[175]. - Net income for the quarter ended March 31, 2025, was $6,310 million, an increase from $4,470 million in the previous quarter[187]. - Basic earnings per share for the same period was $0.38, compared to $0.26 in the prior quarter, reflecting a 46.15% increase[187]. - Net interest income for the quarter was $31,357 million, up from $29,687 million in the previous quarter, indicating a 5.64% increase[190]. - The net interest margin, annualized, improved to 3.07% from 2.83% in the prior quarter[190]. - Return on average assets, annualized, increased to 0.59% from 0.41% in the previous quarter[187]. - Total stockholders' equity rose to $404,409 million from $400,901 million in the previous quarter[189]. - The efficiency ratio for the quarter was 66.52%, an improvement from 69.32% in the prior quarter[190]. - Tangible book value per share increased to $22.72 from $22.40 in the previous quarter[189]. - Net income for Q1 2025 was $6.3 million, up from $4.5 million in Q4 2024, driven by a $1.7 million increase in net interest income and a $3.6 million rise in non-interest income[198]. - Net interest income for Q1 2025 was $31.4 million, a 5.6% increase from $29.7 million in Q4 2024[199]. - The effective tax rate for Q1 2025 was 22.4%, up from 14.4% in Q4 2024, primarily due to changes in pre-tax income and tax-advantaged earning assets[204]. Asset and Loan Management - Total assets as of March 31, 2025, were $4,324,917 million, slightly down from $4,339,833 million at the end of the previous quarter[187]. - Total loans were $3.4 billion, with a net loan growth of $18.2 million for the first quarter of 2025, primarily driven by residential real estate loans[207]. - The loan portfolio grew by $22.3 million, or 0.7%, from December 31, 2024, with residential real estate loans increasing by $19.6 million, or 1.5%[217]. - The average yield on the loan portfolio was 5.30% for Q1 2025, consistent with Q4 2024 and up 28 basis points from Q1 2024[242]. - The percentage of total loans represented by residential real estate increased to 39.0% in Q1 2025 from 38.9% in Q4 2024[240]. - Nonperforming loans decreased to $19.0 million, or 0.56% of period-end loans, down from 0.62% at December 31, 2024[216]. - Loans past due 30-89 days and accruing interest totaled $18.3 million at March 31, 2025, down from $20.5 million at December 31, 2024, representing 0.53% of outstanding loans[263]. - The total amount of loans maturing after one year was $1,136,015, with fixed interest rates accounting for $745,369[243]. Capital and Liquidity - Arrow's liquidity position remains strong, with a current ratio of 1.5, ensuring sufficient funds for operational needs[176]. - The CET1 ratio as of March 31, 2025, was 12.59%, exceeding the required minimum of 7.00% plus the Capital Conservation Buffer[192]. - Total Risk-Weighted Assets were $3,143,547 million as of March 31, 2025, compared to $3,126,364 million at the end of Q4 2024[192]. - The total cost of deposits decreased by 18 basis points from the prior quarter to 1.97%[253]. - Noninterest-bearing deposits accounted for 18.0% of total deposits, down from 19.1% a year ago[250]. - Arrow Bank's Common Equity Tier 1 (CET1) capital ratio was 12.59% as of March 31, 2025, significantly exceeding the minimum requirement of 4.5%[271]. - Arrow's primary liquidity ratio was approximately 10.5% of total assets, exceeding the internal policy limit of 5%[288]. Strategic Initiatives - The company plans to expand its market presence through strategic acquisitions in the next fiscal year[175]. - The company is investing in technology upgrades to enhance customer service and operational efficiency[176]. - Arrow's commercial loans have minimal exposure to sensitive areas with high vacancy rates, with only 2% of the portfolio in office-related properties[244]. - Arrow's total borrowings decreased to $8.6 million from $106.5 million at March 31, 2024, reflecting a significant reduction of 91.9%[222]. Non-Interest Income and Expenses - Non-interest income for Q1 2025 was $7.8 million, significantly higher than $4.2 million in Q4 2024, primarily due to the absence of prior quarter losses related to investment portfolio repositioning[202]. - Non-interest expense for Q1 2025 was $26.0 million, slightly up from $25.8 million in Q4 2024, including approximately $600 thousand in expenses related to the Unification of banking subsidiaries[203]. - Non-interest expenses increased by $2.0 million, or 8.5%, totaling $26.0 million, driven by higher salaries and technology costs[297].

Core Insights - Arrow Financial reported quarterly earnings of $0.38 per share, missing the Zacks Consensus Estimate of $0.44 per share, and down from $0.45 per share a year ago, representing an earnings surprise of -13.64% [1] - The company posted revenues of $39.2 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.85%, and up from $34.31 million year-over-year [2] - Arrow Financial shares have declined approximately 14.6% since the beginning of the year, compared to a decline of -5.3% for the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.66 on revenues of $40.71 million, and for the current fiscal year, it is $2.51 on revenues of $164.79 million [7] - The estimate revisions trend for Arrow Financial is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Zacks Industry Rank for Banks - Northeast is currently in the top 30% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Net income for the first quarter of 2025 was $6.3 million, or $0.38 per share, compared to $4.5 million and $0.27 per share in the fourth quarter of 2024[2] - Net income for Q1 2025 was $6,310,000, representing a 40.98% increase from $4,470,000 in Q4 2024 but a decrease of 17.66% from $7,660,000 in Q1 2024[19] - Basic earnings per share for Q1 2025 were $0.38, compared to $0.26 in Q4 2024 and $0.45 in Q1 2024[19] - Basic earnings per share (EPS) for the quarter was $0.38, compared to $0.26 in the previous quarter, reflecting a 46.15% increase[22] Income and Revenue - Net interest income reached a record $31.4 million, an increase of 5.6% from $29.7 million in the previous quarter[6] - Total interest and dividend income for Q1 2025 was $50,366,000, a slight decrease of 1.05% from $50,901,000 in Q4 2024 and an increase of 7.25% from $46,677,000 in Q1 2024[19] - Non-interest income for the first quarter was $7.8 million, significantly higher than $4.2 million in the fourth quarter of 2024[12] - Total non-interest income rose to $7,839,000 in Q1 2025, up from $4,227,000 in Q4 2024 and slightly down from $7,858,000 in Q1 2024[19] Assets and Liabilities - Total assets increased by $142.5 million, or 3.3%, to $4.4 billion as of March 31, 2025[12] - Total assets as of March 31, 2025, were $4,324,917 thousand, slightly down from $4,339,833 thousand at December 31, 2024, a decrease of 0.34%[32] - Total liabilities rose to $4,044,476,000, an increase of 3.56% from $3,905,447,000 at December 31, 2024[20] - Total stockholders' equity increased to $404,409,000, up from $400,901,000 at the end of 2024, reflecting a growth of 0.13%[20] Credit Quality - The provision for credit losses was $5.0 million, up from $2.9 million in the previous quarter, primarily due to a specific reserve of $3.75 million[12] - Provision for credit losses increased significantly to $5,019,000 in Q1 2025 from $2,854,000 in Q4 2024 and $617,000 in Q1 2024, indicating a more cautious outlook on credit quality[19] - The allowance for credit losses increased to $37.8 million, representing 1.11% of loans outstanding, compared to 0.99% at the end of 2024[15] - Allowance for Credit Losses at the end of Q1 2025 was $37,771 thousand, up from $33,598 thousand at the end of Q4 2024, indicating an increase of 12.9%[34] Capital Ratios - Arrow's Common Equity Tier 1 Capital Ratio was 12.59%, exceeding regulatory standards[15] - Common Equity Tier 1 Ratio decreased to 12.59% in Q1 2025 from 12.71% in Q4 2024, indicating a decline of 0.12 percentage points[29] Shareholder Actions - Arrow repurchased $3.4 million worth of shares, totaling 128,047 shares at an average cost of $26.48 per share[9] Efficiency and Returns - The efficiency ratio for the quarter was 66.52%, an improvement from 69.32% in the previous quarter, indicating better expense control[27] - Return on average assets (ROAA) for the quarter was 0.59%, up from 0.41% in the previous quarter[22] - Return on average equity (ROAE) for the quarter was 6.33%, compared to 4.52% in the previous quarter, reflecting a significant increase[22] Loan Performance - Total Loans reached $3,416,868 thousand as of March 31, 2025, compared to $3,394,541 thousand at December 31, 2024, marking an increase of 0.66%[34] - The company reported a net gain on sales of loans of $101,000 in Q1 2025, compared to $74,000 in Q4 2024 and $4,000 in Q1 2024, indicating improved loan sale performance[19] - Nonperforming Assets decreased to $19,459 thousand as of March 31, 2025, down from $21,497 thousand at December 31, 2024, reflecting a reduction of 9.5%[34]